tv Book Discussion CSPAN January 11, 2015 3:00pm-4:31pm EST
ht. what accounts for inability to get those lessons down in the face of so much else? >> i think to a very large extent conservative intellectuals believe it or not have a large streak of idealism. it dominates the first approach to political questions. that explains the conservatives reference for the american founders. james burnham would say look what a realist madison was which is absolutely right. it is almost that simple because most conservatives say i'm pretty realistic and that's true also. i think burnham is absolutely without illusions about any sentimental idealism in the way it comes to site. that's why. i'm familiar to so many people appeared to resist thinking that coldly about things. >> werner explains this himself which i agree, that is a central book of his thought and the other emanations in the way. he's describing distinctions and
i could never remember that term, but one means a disposition of people, desires or actions you might say and other rationalizations that these aims. the rationalizations change all the time. but the desires remained fairly constant. does anyone remember the terms, drawing on pareto, i can't remember sorry. the point however is there is permanent disposition, which you called idealism which certainly fits and occurs again and again and events it seems to me not just arguments. defense has to confirm burnham's analysis before people begin to take it seriously. >> of course as a discussion about guilt and have guilt motivates much liberalism and in
one sense that liberalism replaces christianity in a sense that you're right christianity was all the guilt problem for individuals that they were truly professed christians, which is a rather interesting aspect of the book i think. there simply emphasizes if you feel guilty then you want to help -- you want to do something. it didn't matter what you do as long as he do something that's intended to help people and that helps yourself a great deal in this raises the guilt you may feel about your relatively better off position. ..
[inaudible] confidence [inaudible conversations] [inaudible conversations] >> is there a nonfiction author or book you'd like to see featured on booktv? send us an e-mail to book email@example.com, tweet us or post on our wall on facebook. brandon garrett is next on booktv. the law professor questions why when dealing with crimes commitled by large corporations federal prosecutors favor imposing fines over jail time for corporate executives. this is about an hour and a
half. [inaudible conversations] >> thank you for coming. good afternoon. welcome to the cato institute book forum on "too big to jail" i'd s ask you to silence your cell phones if not turn them off. we appreciate it. i also like to start by thanking mr. copland and professor garrett for taking the time and trains necessary to be with us here today. over the last decade prosecutor hayes increasingly turned to resolve investigations into corporate wrongdoing with contracts instead of criminal charges inch return for a corporate defendant paying
millions or billions of dollar to the government in promise to make reforms prosecutors agree to forego or delay trials. corporate prosecution agreements are subject to mine until judicial oversight and details are rarely made public. in part because of that, while these agreements are the subject of substantial criticism from across the political spectrum they haven't been the subject of much substantial research until recently. we're fortunate today to be joined by two experts in this field, each of whom has devoted considerable attention to the problems posed by corporate prosecutions, and i'd like to first off professor garrett, the woodruff morgan professor of law and the author. this book is the result of a nearly decade-long project to build a comprehensive database of all corporate prosecutions and convinces since the material 2001's. he has made the databases available online along with 2,000 conviction agreements and
the original documents obtained in foia requests. i you read any of the research in this area you have almost certainly read a paper that if not written by professor garrett, cites hit database. the only material out there. this is professor garrett's second book. his first "convicting the innocent" took a similarly data approach to exoneration and won a gavel award and constitutional commentary award. then we'll hear from james cop land senior fellow and director of the center for legal policy. he has considerable background in business and law, jdmba from yale and a masters, he was consultant at mckenzie and served on the board of numerous private and public foundations. he has twice been named to the national association of corporate director of the 100 most influencal individuals in corporate governance. he is cited in the "new york times," "washington post,"
"economist" and "wall street journal," and is a regular -- a dominant theme in mr. copland's work is identifying the costs and complications of applying criminal law to corporations. his most recently addressed the problem of ntas and dtas in the 2014 report released, titled "the shadow lengthens: the throat -- threat of prosecution." before turning over the mic to professor garrett warrant to take a moment to shamelessly plug this book. it's very very good. the amount of research that is presented here, to the last 1 pages are the appendix and notes. there's an aston-ingly amount of information ooh here but doesn't slow it down. i learned something on every page including that ostriches
can run at 40 miles-per-hour. thank you very much, professor garrett. >> thank you so much. what i'd like to do for 20, 25 minutes is give you a walking tour of my book and my book begins with the sentences: i know what this is about. i've been expecting you. kind of a james bond movie type line. this is the cover of the book and this is the person out whoered the lines. i've been expecting you. this was in 2006, when german police german law enforcement, came could his house knocking on the door. he worked at siemens, and i dubbed him the banker but he was recall really doing was accounting and banking tens of millions of dollars in bribes
being paid to secure contracts around the world. any corporate crime starts with a person and i will be returning to this case as an introduction to the complexities and many wrinkles of corporate prosecution. so i'd like to give you a sense of what a case is like and then what this larger data i have collected can tell us about how corporations are prosecuted and how the fundamental practice of corporate prosecutions has shifted remarkably over the least ten years, and even just in the last five years. the banker spoke about his role in the case and we have in part because of that we know a fair bottom of what was happening other. reasons we know what was happening at sieman's but he described how they knew under germ yap law you weren't supposed to be paying bribes around the world but he thought it was singh steel company's success and the company wouldn't be able to do it work if they didn't pay the bribes. it made have been the authorities in munich that
knocked on his door but the investigation quickly shifted to the united states. we are now the center for many multinational corporate prosecutions. the investigation lasted for several years these cases aren't resolved quickly like street crime cases might be. and investigators, including lawyers at new york law firm that sieman's hired to investigate itself to turn itself in, uncovered over a billion dollars in bribes paid around the world, for projects ranging from identity cards to subway systems. the sec described it, the doj described it as the biggest foreign bribery case they had yet seen and it remains the biggest bribery case in terms of dollars paid around the world that has ever been prosecuted in the united states. the company pleaded guilty. it was convicted.
and most criminal cases in the u.s. are resolved through to plea bargains. this company didn't get one of these defender -- deferred and noon prosecution agreements. the plea agreement is long and so i put it on the side by using word art. you can gate sense that it's describing different governments and different payments. it was a long section describing basically what happened at siemen's. a statement of fact. didn't name names but the broad outlines of the charged conduct, and then terms having to do with payments of fine, monitoring compliance, changes siemen's would make in response for the prosecution. the guilty plea was entered in front of a judge here in washington, dc just down the street to federal courthouse. there was a hearing. the company had to waive its rights which is awkward because the lawyers have to explain we represent the company. we understand that the company has rights and we agree to waive
the company's right to a trial and a right to a speedy trial and a right to present evidence beyond a reasonable doubt. but the lawyers presented the waiver of those rights and the company pleaded guilty. the judge in the case actually had some questions about the fine since the judge noted that, under the sentencing guidelines, this is a fine that could be up to $2.7 billion. why is it only $450 million? prosecutor cite ie men's cooperation and spending some much time and money investigating itself. also the fact that another large chunk of money was being paid to the securities and exchange commission, $50 million. and really half the fine, 800 million, was paid to the german investigators who had begun the investigation, and after all siemen's is a german company so this is a cooperative binational criminal investigation. the fine wasn't all. the prosecutor said, look we're not just trying to fine this company. we'd like to reform it.
the company has promised to make extraordinary changes to make sure this type of bribery doesn't re-occur. they have agreed to corporate monitoring for four years and they were so happy with the monitoring they agreed continuing the monitoring even longer. we're going to establish all sorts of new compliance programs and we as the company agree cooperate in any investigations of wrong-doing by our employee. whatever you need we'll help you figure out who did what and when, and so quite detailed plea agreement. the company was agreeing to not just pay a fine in the present but to continue to cooperate and report to prosecutors in the future prosecutors would then be hearing over several years what the company was doing and whether it was adopting recommendations of its monitor. a company would in effect be on probation for four years. so, here's how this case fits into the top 20 biggest corporate fines in terms of fine amounts through 2012, but at
2014 it would be further down the list today. in fact just a couple weeks other, credit suisse paid a record multibillion dollar fine bp will be sentenced this friday. that will be at the top of the list involving many billions of dollars. but this was the largest foreign bribery case of all time. when you look down the list the type isn't that large but what you see is a lot of foreign companies, and the biggest cases over the last decade, you see many case involving pharmaceutical prosecutions, antitrust, some fraud cases, a couple of sepa cases. certain crimes which seem to be producing the big blockbuster cases. this chart shows it in a different way. the economist ran a version of this earlier this fall maybe some of you saw the story they did about criminalizing the u.s. economy. although it should be the global economy bus many of the biggest billion dollar cases involved
multinational companies doing work and engaging in violations all around the world. certainly what emerges from this principle addition of my data is that -- presentation is that corporate fines have skyrocketed particularly in the last few years and these include penalties, so money paid to prosecutors in some cases the money payment isn't characterized as a fine. it's a forfeiture or restitution paid to compensate victims. this is the money paid to prosecutors and you didn't see billion dollar cases before 2009. in fact in 2009, there's a big purple block there which represents the siemens case but they're a much bigger original block which represents a $1.2 billion fine paid in a case involving a subsidiary of pfizer. a number of big pharmaceutical cases like that in the last few years. but what this also shows, you have to look beyond just the
aggregate penalties in any year you see a lot of variation there between -- ranging year to year. what is the type of crime dominating that year's fine? some years it's environmental and some years it's foreign bribery, some years it's a pharmaceutical case. somethings are somewhat steady. there's quite steady antitrust enforcement from year to year but scpa foreign bribery cases to the exploded in importance in just the last decade. the pharmaceutical cases, they've absolutely grown in importance in the last half decade. and the billion dollar fines that are now the new normal often these blocks of color represent just a single case in that year. handful of block butter -- blockbuster cases are driving the explosion in fine. 2002 remarkable year for
corporate penals, mostly because of the fine the bp paid out of the gulf spill prosecution. that is the red block in 2013. 2014 is an enormously pink year and that will be -- that's really a tentative pink -- assuming bnp pays the fines prescribed in the guilty plea entered, then there will be 2014 will be a truly remarkable year with the largest ever sanctions violation penalty paid by a bank. and so, these blockbuster cases drive the news coverage but there haven't been an increased in the numbers of corporations prosecuted and there's enormous variation in the size of cases and in the particular industries and crimes that happened to be prominent in the given year. some asked why someso many of these cases involve foreign companies, like the sie me ens
company. it is absolutely true that average fines paid by foreign companies are larger and i get asked by journalists in france and switzerland and germany, why are our companies being targeted? controlled by crime and size of company, whether it's using public or not as a proxy. that it doesn't explain this. it could be that foreign companies are worse violators, and win you look at the size of the sanctions violations in the bnp case there hadn't been a sanctions case of that size that had ever comp to u.s. prosecutorses' attention before. it could also be that foreign companies didn't know in the past how to cooperate with u.s. prosecutors basically how is this regime working in the u.s.? perhaps over time as they have grown accustomed to what u.s. prosecutors are up to oar as they hired u.s. law firms they have been able to receive the type of more lenient agreements that their domestic counterparts were receiving.
it's hard to say just from reported outcomes in cases where there was a fine. this just gives a sense of the crimes where the biggest cases tend to fall and similar to that chart i showed you, antitrust, foreign bribery pharmaceutical, banking cases involving money laundering violations securities fraud, tend to be the bigger cases. this is also to show that the money denoted as a fine is just the beginning. the deferred and nonprosecution agreements, far more money was paid to regulator in parallel agreements accompanying the agreement that prosecutors entered. quite a bit of money that we know of was paid in private suits, but private settlements are not always made public not always possible to know how much a derivative lawsuit settled for, for example. and money paid for restitution forfeiture. money that might make its way to victims but isn't really a
penalty for the crime. so the rise of deferred and noon prosecution agreements, the sie me ens guilty plea was filed in court. the company has a criminal record so do three of its subsidiaries. there was a judge there, asked questions about the agreement and the case was concluded. nonprosecution agreements are never filed in a court. it's a private agreement between the parties. the prosecutors say we're not going to prosecutor you assuming you pay fines and comply with these terms. deferred prosecution agreements are filed in court but what is filed in court is a tolling of the speedy trial act. basically we agree let this case sit on the judge's docket assuming yaw pay the fine and comply, we dismiss the case and nothing happens, no indictment no conviction no criminal record. what has been really interesting to watch over the last decade is the rise of these agreements. i started tracking them early on in my teaching career starting in 2006. at that point there had on
billion a few dozen these things itch could stack them in a little pile on my desk and read them all. what we have seen since is that the lion's share of the biggest corporate prosecutions involving public companies have intended to involve these deferred and noon -- nonprosecution agreements. the numbers aren't that great. many, many dozens more companies are convicted every year, but those cases tend to be small mom and pop type cases, minor environmental law violation reports billing fraud violations. the biggest cases involving the public companies, the really important ones of public interest have disproportionally been these deferred and nonprosecution agreement. this is a charge involving a public company. starting in 2005 in most years, most of the public companies prosecuted are receiving these deferred and nonprosecution agreements as opposed to plea agreements where there's a conviction. why the change? one part of the change was a new
approach announced in 2003 by the department of justice, and there's some genesis of this in an earlier memo written by eric holder when he was deputy attorney general. some of the change had to do with the fallout of the arthur andersen prosecution, which i describe in some detail in my book as a totally fascinating case and the fascinating criminal trial. these nine factors are assign node particular weight but prosecutors are told you need to think about it when you're profiting a company. is it really a good idea to pursue a conviction? is it enough to just prosecute the employee? how seriousas the wrongdoing? did it reach the highest level? and is the company reporting it to you? corporate crime may never come to anyone's attention unless someone reports it to. how good is the company's compliance? its promising to fix compliance in would a conviction or prosecution destroy a company, put innocent employees out of
work would civil fine be enough so a whole family of these. the sentencing guidelines emphasized similar things. they emphasize compliance and whether higher can ups tolerated the conduct. and then there's the question do prosecutors follow the factors or care about them? you think that compliance would be really important in these prosecution agreements given how that's a whole set of those factors resolve around remedies and compliance. most of the agreements i read sort of say general stuff about due diligence and adopt some effective compliance, adopt some best practices. well is the company supposed to actually review its compliance and do audits? if the prosecutors really cared about that, it would be standard for such things to be required. not so much. a minority of agreements, small minority, where prosecutors say ex-want you to actually be -- pay attention to risks, odd did
the compliance, be sure it's actually working. you would hope that companies that actually have very good, carefully audited compliance would receive special credit for that. it's not clear that's happening. when you look at the terms of the grandmas these are just the deferred and nonprosecution agreement. most of the agreements do involve compliance requirements but there is a surprising number in that second sort of more pink column where no compliance reforms are imposed by prosecutors at all. and what is going on in those cases, it's an even smaller number in black there in which auditing compliance is required. so please do some compliance but we don't want you to check on it or into how it's working. sometimes the company is given credit for compliance that was already adopted or regulators were supervising compliance. smaller number of these agreements ask that the governance of the company be changed. hire a chief compliance officer. that will report to the board. hire other new employee0s to
shape up compliance, sometimes will real details for most part not so much. a minority of the cases corporate monitors are imposed. independent figures are supposed to supervise the compliance. let's talk about the monitors. the siemen's case there are two monitors. a monitor that was familiar with german corporate law and german finance and they hired a german finance minister an extremely prominent person. joe lawn from gibson dunn here in washington, dc was the american counterpart. both of the monitors talked to me when i was working on the book and it was fascinating for me to hear about their work. we don't typically hear anything about what monitors are doing or what is happening during the implementation of a corporate prosecution agreement. the siemen's company may be the exception. they're quite proud of the work the monitors did and feel like it did good things for their company. the monitors described it being
an extremely labor-intensive and enjoyable many years they were doing this work. in fact dr. weighle was telling me how siemen's never failed to approve any of his recommendations. they gave him the -- when you first walk into the headquarters to show how important the monitor was and if you read the translated versions of the crowe's speeches, he will heal -- hale the work of the monitor, thank you so much for the work you are doing. most companies don't talk about that way about cases over which they were prosecuted. neighbor was a a change. they felt this global bribery scheme was embarrassing and wanted to rebuild the company from the top down. new rowe crowe, all the top positions were replaced.
much of the leadership was replaced, and interestingly the company is nothing short of a proselytizer on the prospect of good business. they have been entering integrity pacts along with anticompliance officers in different countries they do business in. and the monitors hey described it's just a totally different company, doing compliance work is considered to be a prestigious job in the company pathway to future promotions, not a back water. maybe this corporate prosecution is an enormous success story and prosecutors were right 0 focus on compliance and not just imo'ing the biggest fines possible. it's impossible know from the outside, but it was fascinating to get to talk to some people who did some work on the inside. then the question is, so the company has changed and the company has paid fines. how about employees? typically in these deferred and nonprosecution agreements employees are not prosecuted.
i talk about the challenges prosecutors face in this regard and it's 35% of the cases where employees are charged. this is also updated data through this year, or through what happened so far this year. and those are just individuals charged. even fewer end up getting convicted and serving any jail time. and white collar cases prosecutors have higher loss than in street crime cases. much of these indicates resulted in dismissals acquittals, or defederal prosecution for executives. in this case, arlen specter gave speeches on the floor of congress saying this is the biggest foreign bribery case ever. someone must have paid the bribe. why is no one being prosecuted? unfortunately that wasn't good news for the banker. the banker was convicted. received probation in exchange for his cooperation. and perhaps in response to
suspecter's speeches -- specter's speeches the prosecutors did announce several invites in the case eight different indictments in 2011. didn't sound like there was any realistic possibility any of the individuals would be extradited to the u.s. and nothing has happened in those cases since, presumably because all those individuals are in countries that don't have extra extradition agreements. so what are the lessons from this for companies? they're complicated lessons for companies. depends on which group of prosecutors, developeds on what type of agreement is anticipated, and there's a deeper question if -- do prosecutors surprise compliance -- prize compliance enough you're a company trying to show you're on the right side of the law what do you do if prosecutors don't insist on compliance being audited, should you audit it anyway to make sure it's working so you can show you have top of the line compliance?
are there metrics for doing so and what incentives to collect data on your compliance if you might just uncover more violations which could lead you to be on the receiving end of a corporate prosecution. and then for individuals, as an individual, should you feel like the company will protect me? individuals don't always get prosecuted in these cases. in fact they often do not. maybe the company will have incentives to throw individuals under the bus but it doesn't happen that often. that wouldn't be the message that prosecutors would want to be sending in these cases. the banker, feeling embittered by the fact he and some middle managers ended up getting prosecutorred in germany but nobody higher up, the 11th 11th commandment is, don't get caught. and i'll end now at the place where i end the book, which is this whole practice of corporate prosecutions has been re-invenned over the last decade in the u.s. we're now a global censor or the
multinational cases and prosecuting corporate crime in a way we haven't before and other countries had not done before. other countries are starting to emulate the u.s. approach, including in the u.k. where they now do prosecution agreements and i want to highlight that based on the overview description, there are important questions whether we are doing this the right way, and whether the u.s. approach is worthy of imitation, much less being continued. these cases involve conduct and corporations that are incredibly important to the u.s. economy and the world economy. i title the book "too big to jail. "companies can't be put in jail. do think corporate prosecutions, whether you think there are too many or too for a they're too important to fail, to important be to brought in a casual way and so i hope that our discussion today and maybe even the book will encourage people to consider more carefully the
stakes in these corporate prosecutions. thank you so much. [applause] >> thank you, thank you professor garrett, and thanks for the cato institute for having me here to respond and discuss this. i've written or co-authored or authored four different reports and published another on this subject so it's something i'm particularly interested in and i just want to say that professor garrett's web site, as was noted, it such an invaluable resource here and his book is also going to be an invaluable resource as well. i a heartily recommend it. i certainly have disagreement with the normative gloss in the book which didn't come through today in the presentation. but it's a treasure trove of resource and i think i'll flesh out in my talk some of the areas the possible disagreement that the professor garrett and i have
here. i've spoken to the new general counsel about this and one of the collateral consequences here has affected me because siemen's moved u.s. headquarters from white plains down here to washington, dc in response to this and because my wife is a college counselor and head of the english depth at the german internam national school in white plains in new york, that certainly had an effect on her student body. a very minor collateral consequence but some major collateral consequences of the deferred prosecution nonprosecution agreement is studied which-a subset of the total folk cause of professor garrett's work. but for large corporations are in fact what is the new normal. how strange is that in historic practice? this is historically new. for the first 204 years or so of u.s. history there was never a deferred prosecution agreement
or nonprosecution agreement of a corporation. they began in late 1992 or so under the -- actually began under the first bush administration, carried through the clinton administration in the first decade there were 17 or 18, depending on how you count. in the last decade, over 300 of these. so a dramatic shift in terms of how the federal prosecutors are dealing with large businesses. i want to go through four different areas of liability types of questions or responsibility types of questions that i think are have gone points -- interesting points and areas of potential disagreement between me and professor garrett. the first is liability itself. i think as he notes too big to jail a great book title but corporations are not -- it's not possible to jail a corporation. and it's important to understand
that the u.s. is historically and currently an outlier here. some foreign countries don't have corporate criminal liability at all including germany. maybe that's one reason they got in trouble. maybe not. but germany's functioning economy without a principle of corporate liability at all. in anglo-american black it was deemed that corporations because they don't have a criminal intent, a mens rea generally were not presumed to be able to be criminals. that doesn't mean they can't be sanction bed i the state. just means it would be civil or regulatory sanction instead of criminal there were exceptions to that particularly around the area of public nuisance and municipal corporations trying to clean up streets and ports and things like this. but really it's about 105 now-year-old practice of corporate criminal liability all in the united states.
the seminal case in 1909 was new york central. the supreme court of the united states did not in fact create criminal liability. all they did was say congress could create it through its interstate commerce regulation and a lot of what we now have as corporate criminal liability in my view is sort of a steroid type extension of this principle that is not necessarily even authorized by congress, but the courts inferred criminal liability where congress hasn't spoken on the point. the second point is the jurisdictional question and professor garrett talked about the foreign companies falling under the ambit of u.s. prosecution. that's unambiguously the case. it's clear the u.s. is policing outside its borders and doing so very, very broadly. with relatively thin reads --
reeds of cases. there are cases -- and i've discussed it in some work -- in which you have a foreign business, headquartered abroad paying bribes to foreign companies there, and the only next nexus to the is in some cases a stock market listing which is arguably a reasonable listing, although the effect of using that as a jurisdictional hook for activities that occurred completely out of the u.s. border is is to create a delisting of the exchanges which is a trend we have seen. the other -- some of the other jurisdictional hooks conclude even thicker. an e-mail that has gone through a u.s. router. a bank account that necessarily has to clear because their dollar denominated transactions that have to clear through u.s. banks. these are extremely thin jurisdictional reed s. the companies involved don't
take them to court but it's an extraordinary assertion of power. the third point is sort of on the policy 0 some of these big cases anyway, and chapter in this book focuses on some of these -- in far on some of this offlabel drug sorts of prosecutions, nonprosecutions, customer integrity agreements side nonprosecution agreements and what have you. billions of dollars on this. what this involves -- there's no question that there are clear fda rules -- not clear fda rule -- no question there are fda rules on the -- what you can say about the use of a pharmaceutical product when that use has not been subjected to a full fda review. but these are not illegal uses of the drug. very important to be clear. these are use that get reimbursed through medicare and
medicaid and are documented in the new england journal of medicine and in the medical literature and there's a gag order on the corporations from being able to tell doctors about the uses through their sales team for products because the fda hasn't spent billion dollars reviewing that use. so, that's the regulatory issue here at play that is coming into play. now, whether that's a good or bad policy answer, is open to debate. i've argued for safe harbor for truthful speaks. i think lives are lost by muzzling corporate speak. cases coming in with that policy -- generally in these cases, the individuals are going -- aren't going to jail at all and in fact courts have thrown out individual prosecutions on first amendment groupses and thrown out prosecutions and said the prosecutorial misconduct was egregious, et cetera, et cetera, and i documented is in my writings as well. the fourth principle is a rule
of law. basic rule is the rule of legality. you have to know something is criminal you can't just ex post facto come up with new crimes. this is not unique to the corporate context. this is arguably true in individual context, too. but because these cases are so infrequently tried you can get sbca cases where arguably the statute creates a safe harbor for the conduct. in other words, we're not -- it may be ill lee under the foreign lay, may be unsavory but the sorts of walking around bribes being talked about not the siemen's case but in some of case -- are ambiguous but the company can't take it to trial and you have safe harbor effectively becoming dead letter law, notwithstanding that congress enacted them. the other main concern i have is really comes to remedy and openness and there's first an
authority concern, a separation of powers concern. we have seen some of these dollar figures coming in and occasionally just getting used as effective piggy banks, allocating moneys -- this is going to be more egregious in the civil complex. they're allocating money the way the prosecutor wants and they're not -- these aren't remediation type ofs of expenses. sectly, in terms of how these decisions are made, -- there's a potential conflict interest in public choice concerns here going on. on both sides of these negotiations. so you have individuals who by agreeing to comply and cooperate, potentially could be keeping themselves out of jail. they're paying the shareholders' money out out to do so. on the flip side, the resolving door of the justice department where you're going to make a million dollars a year working on the other side of these
transactions -- not transactions -- nonprosecution type negotiations when you gut out of the justice department. that's what you want to do. that creates a strong incentive for that type of -- finally, competence. what we have are a lot of smart english majors with law degrees creating very extensive regulatory regimes, including over interest rates, you have -- the federal reserve messes up interest rates all the time and they have economists doing this and you have the single most important variable -- notwithstanding there was criminal behavior on the individual level at the banks but you have oversight over interest rates coming in through prosecutors, hsbc some egregious arguably offenses that were brought there but pulling out of foreign countries because that's the only way they can see they can potentially comply with what is being asked of them by
the u.s. government. a foreign bank pulling out of foreign countries due to u.s. money laundering prosecutions. and then of course aig -- not a federal case but eliot spitzer coming of aig. i cringe when i say other compliance officers are getting promote do we want compliance officers running beens? in the seven m.s after hank greenburg left aig that had more credit default losses than over the seven years because they brought in new leadership that was focused on compliance and making regulators and prosecutors happy. so the final point here is there's just no transparency and oversight here and that's what professor and garrett and i do agree a lot. the new u.k. rules that came in, into effect this year the written into effect last year, have a very extensive judicial oversight, transparency type regime and here we have these nonprosecution agreements that don't ever see a court, and then then government asserts the
deferred prosecution agreements -- it's a speedy trial act re-x-ray no substantive review. the agreements determine that any breach is in the discretion of the prosecutor. so effectively, there's not clear legislative oversight on the front end. there's not clear legislative oversight on the remedy. so you have these prosecutors english majors with law degrees, with major regulatory impact. we can talk about potential fixes in the q & a and that's where at least on the procedural fixtures professor garrett and i have agreement. on the substantive fixes he may put me in what he called the abolitionists. i'm not arguing we should abolish criminal liability but some ideas -- but again, think there's a very important book and important topic and i'm glad he brought the public attention on this. >> would you care to make a response?
>> i actually -- there's lots that one could say. there are plenty of federal criminal laws that many of us think are ill advised. there are plenty of areas where we're not sure what the goals of corporate prosecutions are and there are others where i think most people agree that there are quite serious offenses shoot that should be taken seriously. earlier this fall, i was asked bay judge here in washington dc judgely van, to present myself as amicus and advice the judge of the judge's power to supervise a deferred and nonprosecution agreement. and the government's position was, just that that these agreements are filed in court but they're only filed to delay the speedy trial act and delay he the timing. these are timing agreements. a judge can't review the substance at all. i told the judge i thought the judge did have power to review the substance of the agreement but i think these cases door important to be filed out of
court. that said i don't know if anyone in this room thinks just having a federal judge read the agreement is going to solve these problems. judges are going to be def rein shall to deals entered between parties and could be judges that do unreasonable things. that would be -- wouldn't want the company to have to agree or prosecutors to have to agree to. having someone independent read what an agreement says and have some more transparency i think would be a good thing. there's legislation, since we are in d.c. -- legislation kicking around the hill for years that sort of improves transparency of deferred prosecution, limit the use of nonprosecution agreement. i'm not sure if those can be done because of separation of powers reasons. prosecutors for lots of good ropes have lots of discretion to decide how they bring cases. and of course, i just wanted to note that i may have presented some complicated and detailed data about corporate
prosecutions that we know about. there's another aspect of this which is the whole dark matter aspect and i do -- i emphasize in the book that we don't know about the corporate prosecutions that we don't know about. we don't know how a. prosecutors decline cases. are they declining cases without merit. are they're targeting companies in cases that are marginal and declining more case with merit. and if a prosecutor concludes a company or person is isn't, we want innocent's people's names to remain clear but you could imagine a situation for someone like me i would love to know how many corporate referrals, corporate investigations are opened each year. prosecuting companies at the drop of a dime and they rarely decline cases at all. and that's a question that you
just can't answer like so many other things having to do with the discretion and power of prosecutors in this country. we can't get a good empirical grasp on it. it's frustrating for researchers and terrifying for companies. >> i'll start with moderator's privilege to ask the question while we're on the subject of prosecutorial discretion. in one chap fer in your book grew into into detail about the practices under the thompson memorandum where companies are effectively bullied into not funding their employee' legal depthses or say unless you cooperate we're not going to fund your legal defense and one judge said this is a violation of the fifth amendment. that is gone. what's the current state of that and your views. >> those provisions were changed in response to the prosecutions of a number of former employees
of kpmg and the judge in new york issued a series of opinions which are extremely interesting for me because in the course of the summarize opinions he aired a lot of the negotiations that led up to the deferred prosecution. we know a lot more about how the deferred prosecution agreement was negotiated than we normally do. a lot more transparency there. but the jump basically said you can't -- the judge bade basically said -- companies can absolutely decide as matter of policy could do we want to play for our employees' lawyers. we can fire our employees and not pay nor their lawyer but the judge cded in the past they always paid expenses for employees and only because prosecutors had strongly pushed them into it did they hang these employees out to dry. and that obviously puts employees in a horrible bind. the court concluded there that the -- normally you think of the company and prosecutors beings a sir varies and not on the same side. the court concluded they were on the same side and there was a
government fifth amendment triggeredded state action type right. the department of justice immediately changed lots of language in its organizational prosecution memo. they're no longer to bring up the subject of who employees are being paid fees or not and so that language has changed. the underlying problem that employees are caught in a terrible bind where a company is telling them look you need to talk, we're doing an investigation, or you're fired. and in fact we'd like you to talk to prosecutors or if you don't we'll send the notes of whatever you say give those to prosecutors because it's our privilege to waive or not. that's a problem that underlying problem still remains with us. inherent problem in the area. >> i think that's right. i do think there have been some positive fixes in terms of these areas, the attorney-cline privilege, work product privilege areas have been substantially improved. when i started writing about this in 2010 there was still a
lot of consternation about it trying to see how the succession of memos. the first memo was the holder memo in the clinton administration, and then the have been a succession of enemy lows. larry thompson is the most known of those. but i do think there's been significant improvement there. the criminal defense bar is very aggressive on this. i think lawyers kind of get this. lawyers get that the attorney-client privilege thing is a real issue. they're less worried about, what's our oversight going to do to the marketing plans abroad. what's the impact of depriving financial capital in angola. they're less good at thinking about that. pretty good at thinking about things like attorney-client privilege and it has been improved. >> move to the audience. we have few rules, please wait to be called on wait for a microphone so people who are watching this 'live can hear
you. please identify yourself' and any institutional affiliation and please actually ask a question. start with roger. >> roger with the cato institute. a couple of comments for professor garrett to respond to please. stemming from jim copland's commentary. if criminal prosecution is what we're really after here, to prevent these kinds of alleged wrongs, it would seem to me that we would want to pierce the corporate veil and go after the people who are actually committing crimes since corporations per se do not commit crimes people do, and the fact that we don't do that suggests that shakedown may be the ultimate issue here more than prosecution. and i think the second ping -- point to exacerbate that prosecution over events they may
be dubiously crimes as in the offlabel in the pharmaceutical situation here, or in the foreign corrupt practices act. that act is always struck me has dubious because it's hard to identify what the wrong is. you have here a prosecution of giving bribes and in many parts of the world that's just how you do business. either you pay the person off or you don't get the business and the wrong seems to be, is the bribe taker or requester vis-a-vis his principle, if not vis-a-vis the corporation. to put it differently, i've always thought that in the garden of eden the snake got a bum rap. the problem was with eve and with adam, not the snake. so perhaps you could respond. >> thank you. those are great questions.
like i talk about in the book, in these corporate cases, employees often don't get prosecuted. more often than not they don't get prosecuted. to be sure there are thousands of fraud cases brought every year and no corporation is prosecuted and so presumably a lot of fraud cases occur in some kind of a business setting, and presumably in those cases the employer isn't being blamed. but the department of justice has long said our first priority is targeting individuals and that doesn't seem to be happening in these cases where a corporation is being prosecuted solely for the act itself employees and gloat employees -- and yet no employees are ultimately held responsible. whether we'll see that pattern change over the years, who knowes. anecdotally we have been hearing things about prosecutors being firmer in their request that information about employee conduct be provided by the company, but you would think in these cases of all cases it would be particularly easy to
prove who did what where you have the cooperation of the company and have access to documents and e-mails you don't have in the run of the mill criminal investigations. whether some laws like fcpa are a good idea as a matter of public policy or not, that's a moral or ethical or business question, not really my subject. but to be sure, under domestic bribery law normally you focus on he person paying the bribes. the fcpa does not have a normal bribery provision and you're not focus on the foreign officials demanding bribes. you're focusing can -- you think the public corruption aspect would be more important. one thing we have seen, seems to explain the from mence of the fcpa, is more countries around the worlds because of a treaty entered, as signed on to international norms against foreign bribery. whether that makes you feel better about the cases or not.
maybe it doesn't. but for example until germany signed that convention foreign bribery was legal in germany and a company like siemen's would have written off taxes the bribe money it was paying. it was not -- once other first world countries got on the boat that u.s. prosecutors felt comfortable and demanding that kind of accountability and so siemen's is prosecuted quite some time after germany changed its law in response to that treaty. now, that still doesn't answer the request whether you think these foreign bribery prosecutions are a good idea whether they're got at fighting corruption, whether they're good for business. those are hard questions. but the explanation for the sudden rise in them i think has to do with the fact that u.s. prosecutors were more comfortable holding other countries -- companies accountable after these treaties were signed, and many of the biggest cases have involved foreign companies with this
rationale of leveling the playing fields. >> i think roger, those are great questions. i wouldn't go so far as shakedown per se. the public choice incentive problems notwithstanding, i think most of these prosecutors are doing what they -- they'll see something that is wrong, they think it's wrong or it's at least against the law they're trying to enforce -- die think there are problems. the problems -- when they're able to basically become appropriators without come congress, i think that creates significant incentive problems there. also think that some of the substantive issues that professor garrett is called abolitionist -- some of the issues prevent that sort of veil piercing you're talking about.
so when you have a sanction of debarment out there, exclusion out there where you're going to -- let's be clear. this means the company woman be able to do business with u.s. government or get reimbursed. if you're a pharmaceutical company and not going to get reimbursed for drugs that are paid for by the u.s. government? you have a problem. if you are a defense contractor and you're not going to be able to contract with the u.s. government you have a problem. these sunkses are so huge that the companies are basically forced to the bargaining table and then the flip side is that the liability standards are so loose that no matter -- a compliance defense -- who cares. right? they say they consider it. but you don't have an actual affirmative defense, compliance defense, under the law. you also can be held antable for low-level employees. very different than the newell most other countries around the world. so you always have these these -- always have the head in
the stand problem. you have to worry, what if the corporations just organized in a way where the top people are just always avoiding it. this is the mafia, the guys out there the hit men are getting caught but you'll never get the don. i get that concern but the answer that the prosecutors have come up with, the justice department has come up with, is we're going to become super regulators of the company, tell you how to change your practices how you do intense not prosecute individuals. that's strength when you talk about the need for criminal law. it's a really weird mechanism. >> professor? >> we are the only country in the world that has this strict liable criminal standard for corporations. and -- >> i'll just interrupt you in an earlier article you called it an
example of american exceptionalism. >> american exceptionalism. some countries are -- have been on the receiving end of enough of these prosecutions they're changing corporate criminal standards. germany is considering corporate climb legislation. i've been in touch with some academics and prosecutors there. they're thinking about drafting a statute. although in some ways, one of jim's great points was the real threat to a company isn't having a criminal record. arthur andersen went out of business but not because the formality of being convict overred the $500,000 fine. it's the civil collateral consequence, the suspension and debarment that is so threatening to companies. in this last year eric holder said there's no too big to fail. so a couple of banks have now pleaded guilty. ...
cases you. on the seamens case, you mentioned a $5 million bribe for telecom business in bangladesh. were there any derivative lawsuits frozen the competitors to loss of profits and they had their question relate to tyco industries. not that i want to be an apologist for mr. t., but here is the man went to jail for 25 years and the evidence they present is he had the errors. compare that to a company that was sued and settled for $3 billion am which i believe was the largest civil settlement ever for the shareholders were the lawyers took off $600 million in return $2.4 billion to the same shareholders hs to. compare that to enron where
ford was rampant, intentional lost thousands and thousands of jobs crippled people and the cfo of that company went to jail for i think 10 years. >> why did they throw the book at kozlowski? >> the difference in some of these cases say a lot of names about changes over time and sentencing and the complexity and the nature games. everyone talks about the federal cases don't make this a federal case because they are infamous lee severe. but those fraud sentencing is extreme. congress has done lots of things to rent the penalties for fraud, including the maximum starting in response to enron. when you do with white-collar do with white-collar crime committed to a people who don't haven't a criminal record, which is one of the main
considerations. on the other hand one of the sentencing guidelines it has been the subject of a lot of criticism there's a big aba task force on this. one of the other considerations as well as sides of the last two victims are the game. all of a sudden you have a fraudulent scheme with hundreds of millions of dollars in economists debating and it could be a potential fraudulent scheme which was never carried out and never victims, so large money amounts can turn a fraud segment into the case of the two or three year sentence for a life sentence. so judges have said lots of debris things and opinions about how arbitrary some of the sentencing rubric theme and how they don't have adequate guidance on how to handle cases involving large financial losses. so that is one answer. questions about comparing between cases and why did one thing happened in one case and another in another and also these cases are different of
minutes rations different responses to different crises. all sorts of questions about comparing treatments, especially when dealing with small numbers of cases and offenders. a prosecutor's office has priorities in place and if they're prosecuting thousands of drug offenders every year they can rate this one. this is somewhat more serious than the other 200 racing though far this year. we are going to charge the maximums in this case. when you have an office handling a few of these cases, it's all going to look much more arbitrary. >> i would like to know why -- my name is john. i'm a retired pass examiner. you talk about treated to, but she don't talk about the term that is most often used the crisis of 2008 and the fact that hundreds of bankers were sent to jail in the savings and loans
prices, but not a single banker has been sent to jail. >> he actually does talk about them in the book. >> that's a natural question. when people talk about too big to fail they ask whether banks now feel they will be bailed out no matter which risk they take in the tree into criticism eric holder was responding to was the concern that new banks feel they can commit crimes cannot be punished because they are so crucial to the economy. and as has commonly reported, there haven't been big name prosecution since the crisis. there've been civil fraud crises brought against the banks. we now see quite a few major wall street and international banks prosecuted more than one. maybe it's up to three and if you have corporate recidivists and each time there's a prosecution agreement, and maybe they are recidivists. they don't have a criminal
record and something is working in the agreements. this time it is currently in the last time it was different people. those seem like some of the accountability is missing and i think people are right to be concerned that these deals aren't having the intended effect a major financial institutions that we should all care a lot about after the financial crisis. on the question why were particular bankers that particular banks prosecuted for fraud, it's really hard to know from the outside. the line we attended to hear from the department of justice has to do with the difficulty within complicated institutions. whether that's the reason or other concerns like they're in the process of bailing out the very institutions during the relevant time period, i don't know. the cases were somewhat differing. many of the cases had evidence that executives and savings and loan for themselves profiting using money from their own aims. but the kind of average in the
type of conduct for its much easier to show intent and a crime. a looting your bank, that's an easier case for prosecutors to explain then complicated default swaps being borne by also two different players come across also different financial institutions. i can see why the savings and loan cases turned out very differently than the lack of cases after the most recent crisis. >> i agree with what professor garrett genocide. it's not as if there haven't been financial people getting prosecuted. insider-trading doesn't have anything to do with the financial crisis. it's sort of illustrative because they were easier cases to make and we don't want to criminalize negligent mistakes. i do think that is an important principle that we have. i'm a critic of strict liability
crimes then yesterday i was testifying in columbus ohio about re-identifying mens rea standard centers a thought. i don't think we want to put people in jail for massey not. so those standards actually do not bear. that is not to say there haven't been individuals that should've been put in jail. don't get me wrong. i tend to think the whole architecture as part of the problem and part of the reason we haven't seen not because there's operably in many cases were clear fraudulent actions where you could establish mens rea or attends. in some cases they were mistakes. if the entire market is mispricing something, that is probably a mistake. a curious thing is you have all of the -- that tells you
something about what is going on. it could be one person is being a fraudster and in some cases that is true. but these cases are hard to make. it's easier to get the epa if you got evidence because the corporations will cut the deal. if you had a wiretapping you've got people sitting there and getting inside information on the phone, you can make that case. it's much harder to make the other ones. the >> here is a question we talked about criminalizing this takes. in the money-laundering cases it seems most of these violations are a failure to properly detect someone else's criminal wrongdoings. the example you've given the book is jpmorgan and make out 1.7 billion years what's the penalty for that. is there any sort of correlation between not touching someone else's crime than $1.7 billion? the mac i talked more about the
hsbc case where there something much worse the senate. and it did sound like especially it wasn't just the one failure to catch business involving the made off ponzi scheme, that there was a pervasive lack of attention to red flags that jpmorgan but that's another example of too big to jail. no other bank will be charged with money laundering because that requires charter revocation proceedings in destroying banks is usually not a good acs and it's not something prosecutors want to do. banks are charged with an secrecy act violations, which include a recklessness and attention to red flags. any bank may be generating hundreds of thousands upon millions of red flag transactions every year and maybe it was an extreme situation at a place like hsbc
where they have less than 100 people that are supposed to look at all of that and compliance officers kept telling supervisors we can't do this job. seems like there may be transactions with drug cartels and terrorists, but we don't have the resources to follow. but that was the case where there is a deferred prosecution agreement in a statement access to safe supervisors tell us not to do compliance. no individuals were held accountable. maybe the bank has shaped things up and it's a good result and the money is no longer flowing to drug cartels and sanctioned the eames i hope that's true. we have no way of knowing. >> questions? >> yes, thank you. i'm an attorney here in town. i am involved in the case before the legislature right now which your laughter and agreement i
like to comment on the arbitrariness of this is rampant here, where the company was raided by fbi agents in florida for medicaid fraud. they quickly agreed to dpa into the ceo cfo, this is one of the few cases where the employer's were prosecuted. it's purely regulatory. they argue the way they counted the payment were reasonable. the judge said come back with something. they came back acquitted of executives from almost everything except one or two count. what i'm getting at is there seems to be arbitrariness in terms of the use of the dpa is and the nonprosecution agreements as well as going after executives were highly
regulatory field where they should employ civil and administrative revenues, which even the guidelines of the justice department should do. >> it's a separate issue. we have so many regulatory crimes for the crime is a willful violation of whatever is the statute is. it's not unique to the corporate context at all. more than half of the criminal justice system is no immigration prosecutions. that is half of the individuals and involve different politics than white collar crime. we have mass processing centers to take guilty pleas for people violated to reenter the country illegally. not a crime most places. it's a crime here. we are comfortable convicting tens of thousands of people a year are regulatory violations. that is something congress has been doing since before the new
deal. it hasn't necessarily tolerated in recent years. it's a feature of criminal law for a long time but it certainly also means if you are going to turn a violation of a regulation into a crime, there be a real mens rea attached in criminal law is meritorious for having ill-defined or intermediate mens rea with the latter's teeth to it. whether congress will do anything about it, congress normally passes for federal crimes and doesn't clean up the ones that exist. when the supreme court is something to moderate the interpretation, congress comes back and makes it still easier for prosecutors to show. that is the dynamic we have. >> i agree with that. there's lots of various of the criminal law that are messed up outside this one.
but i mean i certainly think when it comes to immigration and drug law there's lots of reforms that we need to consider as well in other areas. but that is fundamentally the problem. i don't think that the mens rea requirement there is hard to them and fair. if you are talking about most of the illegal narcotics are people coming in across the border, there is the knowledge that they are breaking the law. whether that's criminal or not, how we should treat that is a totally different issue. when you talk about the regulatory code it's very difficult. where this comes into play as we've gotten more and more in the direction of mrs. broader is how the small business is supposed to act.
every business is committing federal crimes daily. so of course it's recidivism. this great book, three felonies today where while committing crimes every day without knowing it. if you're big business to create lots of crimes every day. when you've got over 4000 crimes there's no way. if you can put in a state compliance programs and officers in teams of people you've got a better chance of noncompliance. if you're a small business, what he supposed to do. this overarching massive criminal law is making it much tougher for smaller businesses to do business with potential jail times where they run a battle of the law.
>> just a little note to that if you looked on my resource website, the big companies could have the nonprosecution agreements. they can shape but compliance. there's some companies, but it's all mom-and-pop companies which are not getting the benefit and they can't show they are going to do compliance. there is unequal treatment, even within corporate prosecutions in the types of deals that can be negotiated. >> i'm sure mandolin also an attorney in town. coming back to the bribery situations do you have any data on what percentage of decrease the company was a big amount extortion. not here's a million dollars. it's you've got the contract not give me a million dollars or nothing will ever happen in the
company is being victimized by corrupt foreign officials to u.s. prosecutors cannot attach >> some of these cases we hear and fax that in any case for a company is paying bribes, unless it's aggressively trying to pay bribes, there is going to be a demand and so what counts as extortion in that context is hard to say. under domestic law extortion is inferred from someone's office. the word extortion doesn't have any particular meaning exactly domestically. extortion doesn't mean putting a gun to someone's head and saying i want for money. it means you're a public official and you made clear he wants the money. the word extortion gets used in these cases and it's been raised in response and i'm not sure
it's a word that means anything. it is quite clear in some of these cases that they didn't want to pay bribes. they were dragged into it and plenty of these companies openly reported what happens to u.s. prosecutors in turn themselves in. it's not like u.s. prosecutors have much ability to uncover payment of foreign officials unless someone tells them it happens. we can't investigate these things around the globe. if companies they didn't want to do it reported they did it and came clean and are now paying a price for it. often a discounted price because of reporting and cooperation. the >> is a technical matter, what's the contracts are being one aren't fcc violation. >> they have to be minor in some ways. >> probably not. >> the real last name is nobody
knows. it is a safe harbor, but not one that is easy for the company to be the best case for her. because individuals are prosecuted, we just don't know. you're also not going to have great records because of the legal matter, it doesn't matter. it's not as if the company can say they asked for it. that is not going to do them any good. you're not going to see these in terms of the fact patterns. it's a symbiosis there. the goal is a good goal. we don't want bravery. i think it's a good thing not to be able to bribe officials for contracts. and we don't want the folks that are the most efficient drivers to be the ones that win in various business lines. trying to believe that in some way is a good goal. but how you do it matters. >> about 10 minutes left.
>> i will try to be brief. i wonder, since you're getting a database of hundreds of cases now are you starting to see in a country biases get? i wonder for example, that those companies that are careful about the financial reporting and record keeping and documentation could be unfairly, you know targeted by prosecutors with an easier case to build other than reporting and chinese, for example and perhaps that's an secure documents and his chief officials might be difficult to locate and prosecute. >> it is hard to say. it's small enough number of cases limited to the u.s. epa at least that is sort of like reading the tea leaves. you didn't see that many cases involving companies or conduct in china until the last few years. but part of that is another
aspect about the ad hoc sorry major case and often the ones that get reported to them. the countries where these may be investigated or come to light may be the first countries that have signed onto the treaty onto the treaty and where prosecutors feel comfortable going after the multinational company that should be following the laws of this country, even if they themselves are paid in more third world countries where those rules are particularly followed. so there is so much arbitrariness. the case gets reported to prosecutors. oecd country with even more randomness in the sep eight k. says really have three paths are for paths. some of the cases are brought by the sec as purely civil cases. there is a fair number that are simply brought. prosecutors seem to bring plenty of the cases has nonprosecution agreement but they also bring
some of them as plea agreement and i haven't been able to detect any rhyme or reason into why some companies had to plead guilty, my son get a deferred nonprosecution agreement. a lot of memos here on what factors are supposed to consider when you prosecute companies. there is no guidance on why should some companies get convict didn't come not. in the area, you see cases to a completely different paths. maybe the group of prosecutors to bring those cases and has some internal explanation they haven't told us yet, but they haven't told us yet. >> they put along document, but i'm still befuddled. >> one thing that hasn't happened is the role that external monitors play in this. i wondered if you could talk about your thoughts, namely how do we get more billy idol's unless john ashcroft? >> are that the hearings for john ashcroft testified in the house to explain this unusual --
been paid three quarters of a million a month, a flat rate and there may be additional expenses. that said, the money these monitors, his great work if you can get a period of money that they are paid maybe a drop in the backache compared to the fines that the company is pain. some companies have said the work of these is very important and they need outside independent expertise to reform their compliance. i do talk about in the book how most of these monitors are former former prosecutors on whether a former prosecutor is necessary the person most expert in how to do compliance of the industry. i have some doubts. in response to those hearings involving some of the monitors that chris christie appointed, there is a heavy new jersey focus to those hearings. i was just the academic. i enjoyed.
the department did i think on the eve of some of the hearings introduced new rules for appointment of auditors, but still basically an internal decision with more oversight over monetary selection of offices. i think judges should pick the monitors. there should be someone impartial picking the monitor that is best. i do think there is some reason sometimes to think that a company doesn't have the right skills to do compliance on its own and having someone to watch over that would be quite useful. i am kind of surprised if prosecutors are going after the companies that have the biggest and most systemic compliance failures, that is why we bring a case against the company and not just the employees, why so few of the cases involve auditors are required in their compliance be audited. i guess the one positive change be seen in the last two years as the agreements intend to include much more detail fan this is what it's supposed to do. this is the work plan. the monitor does not free range.
it asked the company to do whatever. and much more clear definition of what the monitor's what the monitor's role is, what should happen if they have a complaint overreaching in those kind of ground rules really are a useful development we've seen in the last two years. so that is my note of optimism. >> i hope that's right. i mean, i do think there has been some effort to see a little more systemic. the free rain approaches what bothers me most about. it is inherently problematic to sort of say we need a corporate monitoring these sorts of cases. that being said the prosecutor gets to pick someone. the company pays for it to look over their shoulder to report to the prosecutor. the judges completely out of the loop on this. this is a really odd process then i would have to think they would he a good way to clean the process up here that is even
aside from potential conflicts of interest or how you read your buddy. sometimes the body may be the best guy. in a civil agreement with citigroup, the former deputy attorney general is a buddy who might be the best guy. we don't know that but it is a very large lucrative well-paying gig for someone who may have been a former prosecutor and if anything it potentially exacerbate the whole agency. rather the public choice problem that i was talking about in terms of what is going through the young doj prosecutors mind here. but clearly the expertise is a valid one. the companies had a lot of problems. their internal teams probably had some problems yet i can see why these things get negotiated then. sort of the free-form nature of it is troublesome. i do think they are making some efforts to try to improve this. >> last questions.